Put your financial knowledge of today into action for tomorrow

COVID-19 has been a driver of great change. From the way we work, to the way we live – everything we once knew as familiar is now different, and that includes how much focus we give to our everyday finances.

Our personal finances have borne much of the brunt of the pandemic – be it our super, savings, investments, insurance, or debts. As a result, we’ve learnt valuable lessons about the importance of being financially prepared for prolonged periods of uncertainty and disruption.

According to ASIC’s Financial Capability Strategy, having a healthy level of financial literacy can help us better deal with financial pressures, make informed decisions, feel more secure with our financial affairs, and boost our overall wealth.1

The good news is, data from The Household, Income and Labour Dynamics in Australia (HILDA) survey indicates that Australians are classed as being financially literate, sitting in the top 10 countries globally. Despite this capability, one in three of us still find it stressful to turn day-to-day financial concepts – like budgeting and emergency funds, inflation and interest, risk and diversification, and superannuation and insurance – into tangible action.2

Read on for seven ways you can get on top of, understand, and manage your finances today, to help you live your best financial future.

1. Have a personal budget

Having a personal budget can help you better understand how much money you have now, how much you might want to save for the future, and how much you might be able to put aside for emergencies.

With consistent tracking, you’ll be able to see where you spend your money, and identify areas where you may either decide to cut back or have some left over.

Getting into the habit of recording cash in, cash out, repayments you make, and your living expenses, can give you a view on where you may be able to make small, manageable changes that could have a long-lasting impact.

A good rule of thumb is to try and ensure your expenses don’t exceed your income and have some money set aside for emergencies (see point #2 below.)

You can also access these handy tools to get your personal budget on track:

2. Consider an emergency fund

According to moneysmart.gov.au, having an emergency fund can help to cover urgent or unexpected costs in the case of a financial setback.3

This means if your income suddenly stops, like what happened to many Australians during COVID, then you have a short-term buffer to help you prioritise payments and debts for immediate needs, like housing, food, and utilities. It’s generally recommended you maintain enough accessible cash to cover daily essentials, mortgage costs and other loans for up to three months.

It’s also a good idea to regularly review your essential household expenditure and see how it changes over time, either permanently or temporarily.

Read more in Moneysmart’s article on how to save for an emergency fund.

If you do find you have extra cash available, do you need it now? If not, think about whether you could you add to your savings or emergency fund? Here are a few tips on setting up and maintaining an emergency fund:

  • Pay yourself first – it’s wise to allocate an amount in your budget for emergencies to help keep you out of financial trouble. Moneysmart says that setting aside even $20 a week could mean over $1,040 in a year, more if you invest in an interest-earning account.
  • Get into the habit of saving a small amount each week and treating it as a non-negotiable expense – over time if you don’t need it for emergencies, this could build up to a deposit on a property, more retirement money, and maybe even money for holidays.
  • When you’re putting money aside, consider a higher-interest savings account. (see point #3 below.)

Are you under 30? Westpac Life could help you reach your savings goals sooner by earning bonus interest every month you save with its Westpac Life savings and Westpac Choice bank accounts.

3. Keep on top of inflation

Inflation simply means that the average price of goods and services generally increases over time, that is, it’s likely to be more expensive to buy something in a few years, than it is to buy it now.

For example, a basket of goods and services valued at $40 in the year 1980 would have cost $188.37 in the year 2021 because of inflation.4

This is because unless you earn more than the rate of inflation, after tax, inflation could steadily reduce what your money can buy – meaning if inflation goes up and your income doesn’t then you may need to dip into savings to buy the same goods and services that you bought with your salary last year.

To see the difference in purchasing price of a theoretical ‘basket of goods and services’ over time, try the Reserve Bank of Australia’s Inflation Calculator.

It’s a good idea to understand inflation alongside a few things including:

  • your income
  • your super returns, and
  • any earnings or appreciation on investments or assets, to ensure they counter inflation.

This is where understanding the difference between simple and compound interest can help, as saving more or investing appropriately may counter inflation (see point #4 below).

4. Know the difference between simple and compound interest

Knowing there could be a substantial difference in interest – either charged or earned – depending on whether it’s calculated on a simple or compound basis, could help you make more informed decisions when taking on debt or making an investment. Here’s how they differ:

Simple interest

Simple interest is paid or received over a certain time frame as a fixed percentage of a principal amount. For example, an annual interest rate of 4% on a $5,000 investment over three years would be ($5,000 + ($5,000 x 0.04 x 3)) = $5,600.

Compound interest

Compound interest is paid or received on a principal amount as well as on any accumulated interest from previous periods, also known as “interest on interest.”

Using ASIC’s Moneysmart Compound interest calculator, the same example as above would see a $5,000 investment over three years compounding at 4% totalling $5,624.

Again using ASIC’s Moneysmart Compound interest calculator, after 10 years, this amount would be $7,401. And if $1,000 per year for 10 years was added, this figure would end up being $19,407.

Read more about the Magic of Compounding.

So, when it comes to investing, regularly adding money, and investing for longer can make a substantial difference especially to your super, given its long-term nature.

Thinking about your superannuation and how you could take advantage of its compounding nature over the decades with strategies like regular contributions via Superannuation Guarantee (or SG) payments, and topping up your super with personal contributions, can see your money work harder for you over the long term (see point #5 below).

5. Take superannuation seriously at every age

Since the COVID-19 pandemic hit, superannuation has shown to play a critical role in our personal finances, helping as many as 3.5 million Australians experiencing financial hardship.5

It remains one of the most tax-effective vehicles for saving for retirement, and given it’s an investment intended to span decades, it’s worth taking seriously at every age to ensure you’re on track to meet your retirement aspirations.

Here’s a few other things to think about when it comes to your superannuation:

Consider regular contributions into your account

Regardless of whether markets are rising or falling, you could benefit from compound earnings over the long term, and keep your super account active with regular contributions. If your employer is making compulsory Superannuation Guarantee (or SG) payments, then you’ll already be benefiting from this.

The SG requires most employers to make super contributions into your super account that you nominate (at a minimum) every three months equal to 10% (2021/22) of your earnings providing certain eligibility criteria are met.*

Is your super with BT?

If your super is with BT, log into your account to check your contributions match those recorded on your payment summary or payslip. You can also set up your SG contributions to be paid into your super once you’ve logged into your account.

  • BT Super members log in at bt.com.au/btsuper.
  • BT Super for Life members log in via your Westpac, St.George, BankSA or Bank of Melbourne online banking and select BT Super.

You could also consider contributing more to your super through salary sacrifice or personal contributions.

For any contributions you choose to make, please ensure you understand your contribution limits.

You can read more in the Boost your super guide.

Are you eligible for Government’s co-contribution scheme?

This is designed to help eligible individuals save for retirement when they make a personal super contribution, where the government will match the contribution by 50 cents per dollar up to a certain limit. Even a small, ongoing contribution can over time, make a different to your overall retirement balance.

Read more about Super contributions: government co-contributions scheme.

Review your investment strategy

The same investment strategy may not be appropriate at every stage of life.

For example, when you’re younger, the higher-risk growth assets which typically yield higher returns, may make sense as you’d have time to ride the ups and downs of any investment volatility. If you’re heading towards retirement or are retired, the less-risky, slower-growth assets may make sense as they help protect your capital from investment volatility.

You can read more about investing through different life stages.

Finally, understanding that different assets carry different levels of risk is important when you review your investment strategy (see point #6 below).

Superannuation scams

Be sure you understand how to protect yourself from superannuation scams.

6. Balance diversification and risk with your super


When it comes to super, your money is generally invested into different assets, across a range of different markets, countries, asset classes, and different investment managers. This is called diversification, and it’s a way to help counter the effect of volatility, effectively reducing investment risk (see below).

It’s a good idea to diversify your investments because each asset is likely to react differently to the same event. And although this approach can’t guarantee returns, it can help you to reach your investment goals over the long term, whilst minimising risk.

When you diversify your assets, it means you’re not placing all your eggs in one basket.

Learn more about diversification.


Different asset classes carry different levels of investment risk – where higher-growth assets like property and shares generally carry higher risk than slower-growth assets like cash and fixed interest.

But when economic or political unrest, or health alerts like COVID-19 occur, investors lose confidence and begin selling off their assets. And it’s usually riskier assets – like property, or shares – that tend to be more impacted compared with less-risky assets like cash, or fixed interest.

It’s a good idea to understand your own appetite for risk. For example, is your tolerance for risk the same in the new world we live in, and / or have your investment timeline or goals changed?

The likelihood that you lose or earn money will depend on which investment option you choose. For example, while a high growth investment option may mean a greater chance of high returns, it also has a higher risk of losses. On the other hand, a conservative investment option may provide a lower chance of loss but also a lower prospect of returns.

Managing risk with your investments is important over time, as is being prepared for the unexpected (read points #7).

7. Protect yourself and your family

COVID-19 has certainly shown that the unexpected can happen. There are simple things you could consider today to help secure the financial future for your loved ones if anything should happen to you, including life insurance, nominating beneficiaries, and having a valid Will.

It’s a good idea to review and update these arrangements if any personal circumstances change, for example if you get married or divorced, have children, or receive an inheritance.

Life insurance

Life insurance is like a spare tyre – it’s there if something unexpected happens, and can help cover financial commitments if you’re no longer able to. Most super accounts will offer life insurance, meaning the premiums aren’t taken out of your take-home pay, rather out of your super balance.

When it comes to insurance, consider whether you have the right type and level of cover. Carefully read all the terms and conditions so you know what you’re covered for, particularly for things such as a pandemic.

You can read more at bt.com.au/personal/insurance.

Nominate your beneficiaries

To ensure you can help contribute to your loved ones’ future, it’s a good idea to think about who you’d like to leave your super to, in the case of your death. This is called nominating a beneficiary.

Your superannuation does not automatically form part of your estate, so you need to instruct the Trustee of your super on who you wish to receive your super death benefits if you die.

Read more about nominating your beneficiaries.

Have an updated Will

Many people put off writing or updating their will, particularly when they’re younger, but it’s something everyone should have, regardless of their level of wealth.

While most people understand the importance of having a will, ASIC’s MoneySmart site estimates that nearly half of all Australians die without one.

To help you, read about Estate Planning at Westpac’s Life Moments Hub.

Looking forward

While it’s been a difficult time, COVID-19 has taught us all some valuable lessons about what’s important in life and that we need to be better prepared for the future.

Taking these steps now to future-proof your finances today could put you in a stronger position if COVID-19 endures, or if we’re faced with another crisis.

If you need help to look after your money during this time, you can read Moneysmart’s article on COVID-19 making financial decisions.


* Superannuation Guarantee is not payable if you earn less than $450 in a month (it is proposed that this threshold will be removed from 1 July 2022). If you earn more than $58,920 per quarter (in 2021/22), the maximum Superannuation Guarantee obligation for your employer is 10% of $58,920. 
1 https://financialcapability.gov.au
2 https://financialcapability.gov.au/files/financial-literacy-in-australia-insights-from-hilda-data.pdf
3 Moneysmart.gov.au Save for an emergency fund
4 Reserve Bank of Australia Inflation Calculator

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